2019-05-12 05:00:002019-05-13 04:59:00SPH2US-China trade talks wound up cordially on Friday morning with no talk of collapse. Small setbacks are inevitable in bilateral negotiations, China's Vice-Premier Liu He said, adding: "Looking ahead, we are cautiously optimistic about the future."
]]>US-China trade talks wound up cordially on Friday morning with no talk of collapse. Small setbacks are inevitable in bilateral negotiations, China's Vice-Premier Liu He said, adding: "Looking ahead, we are cautiously optimistic about the future."

Meanwhile, in the United States, there remains broad, bipartisan consensus that President Donald Trump is doing the right thing by pushing back against a rising and aggressive China which has been accommodated for too long by Washington. But that consensus is laced with anxiety.

The outcome was not unexpected, given Mr Trump's assertion on the eve of the talks that China had reneged on what it had agreed on previously. Mr Liu said the two sides had different views on what was agreed at the December 2018 meeting in Argentina between Mr Trump and President Xi Jinping, where the two declared a truce to make time for negotiations.

There is a chance they will surprise with a deal soon, but nobody is holding their breath.

"We're looking at a lot of uncertainty for the foreseeable future," said Dr David Dollar, senior fellow in the John L. Thornton China Centre at the Brookings Institution. Even a deal would be subject to compliance or sanctions. "We'd be better off having a deal but we'd be living with uncertainty either way," he added.

The next chance for Mr Trump and Mr Xi to meet may be at the G-20 summit in Japan on June 28-29. The stakes for that meeting, if it takes place, are now extremely high.

"The chance of a completed deal between Trump and Xi by the G-20 summit... is small," said Mr Michael Hirson, who focuses on China and North-east Asia at the consultancy Eurasia Group.

"Even if they continue regular dialogue - which remains unclear - negotiators will find it hard to thread the needle between core demands and expectations on each side. The possibility of a long breakdown, one that lasts even through the US presidential election, has risen substantially.

"Beijing... needs more time to digest the situation and determine how far it is willing to go to meet what it sees as unreasonable US demands raised late in the game."

The US administration has been instructed to prepare an assistance programme for farmers affected by any retaliatory measures China may deploy. This may take the form of the federal government simply buying produce.

Business Roundtable, an association of corporation CEOs, remained supportive of the administration's efforts to cut a deal to address structural issues in China. "It's imperative China addresses longstanding unfair trade practices that have hurt American workers and businesses," it said.

But it also said it remained "deeply concerned that a return to tariff escalation with China will hurt the US economy and American workers, businesses and farmers. Business Roundtable opposes higher tariffs, which are taxes paid by US consumers, manufacturers and other businesses."

While much focus is on farmers and big corporations, small firms are being buffeted by uncertainty and lack the capacity to quickly deal with reconfigurations of their supply chains or currency fluctuations, Mr Marwan Forzley, CEO of Veem, a global payments company built for small businesses, told The Sunday Times. This was hampering long-term planning.

With the campaign for the November 2020 presidential election in its early stages, the key question is whether the trade war will undermine the robust economy that is Mr Trump's key talking point.

But the President has room to manoeuvre, says Dr Glenn Altschuler, professor of American Studies at Cornell University. "For the most part, the increase in tariffs will not be felt by consumers for several months and, therefore, it provides some room for an eventual settlement (so) in this brief period of higher tariffs the consequences will be relatively small," Dr Altschuler said.

While President Trump uses brinkmanship as a principal tool of domestic and foreign policy, he would avoid going so far as to risk damaging consequences, he said.

"Investors and corporations and businesses with international dimensions are watching and waiting... (but) I think they believe it is more likely than not that an agreement will be reached which will reduce tensions and reduce the most severe consequences of the tariffs," Dr Altschuler added.

"It couldn't be clearer that both China and the United States have a political and economic interest in reaching an agreement."